Shanghai - The chairman of troubled Jinsin Trust and Xinjiang Tunhe Investment has been placed under house arrest, company officials said Tuesday.
The firm said in a statement to the Shanghai Stock Exchange that chairman He Guipin has been accused of illegally raising public funds. It did not elaborate further.
The Xinjiang-based Jinsin sold a number of trust investments worth around 87 million yuan (R69.3 million) to nearly 200 investors a year ago, but failed to repay them when the investments matured in early July.
Shanghai-based Bank of Communications actively promoted these investments on behalf of the Xinjiang company in exchange for fees.
Angry investors have since come forward demanding the return of their capital.
Xinjiang Tunhe is one of three listed companies controlled by troubled private investment firm Xinjiang Delong Group.
Xinjiang Tunhe was classified as a special treatment (ST) stock by the Shanghai Stock Exchange on July 26, owing to its financial problems.
ST companies are usally businesses that have serious profit and loss issues, and have a five percent daily limit on share price movements on the domestic exchanges.
Official corruption is a growing problem in China and a source of considerable public discontent.
After several major financial scandals broke last year, the central government vowed to crackdown hard on graft, although a steady stream of reports in Chinese media suggest the problem continues unabated.
Last week the head of Beijing's major road construction company was reported to be under official investigation for alleged fraud linked to huge infrastructure projects ahead of the 2008 Beijing Olympics. - AFP